Property investment loans

Great investment loans will improve your investment returns, be tailored to your unique circumstances, and smooth the investment experience

Property investors are the most sought-after customer by lenders due to their equity position, borrowing history, and potential future borrowing. It’s important that you use this position to secure the right investment loans to meet your finance needs.

Regardless of your situation, we’re comfortable assisting property investors, including if you’re:

  • Seeking your first investment property
  • Adding to your property portfolio
  • Buying a house for the kids
  • An international property investor investing in New Zealand

Creating wealth through property

Done properly, property investment is an excellent method of creating wealth as part of a long-term investment strategy. Historically, house prices provide a steady return to investors in the form of capital growth as property prices rise, while rent provides passive income. With the right investment strategy in place, smart property investment can be an ideal wealth creation vehicle.

Your loans

Investment loans vary greatly depending on your circumstances and what you’re looking to achieve. They can be very simple (such as your standard home loan), or something more complex that helps you make effective use of tax, gearing and repayments. To help manage your investment loans, you can also make good use of a range of loan features that vary by lender, such as redraw, interest only, offset, and additional repayments. Smart use of such features can greatly increase both your flexibility and return on investment (ROI).

Unlocking equity

It’s common to access the equity in one property to purchase another. The two usual ways to achieve this are:

  • Stand-alone: You release equity as cash with a loan top-up on the property you own, for example to a 20% loan to value ratio (LVR). You then use this sum to buy the rental property with a stand-alone loan at, for example, a 65% LVR.
  • Cross-collateral: You access your equity and buy the rental property with a cross-collateral 100% LVR loan.

The implications of each method above differ. As always, your accountant and lawyer are best placed to advise you on the taxation and legal implications of each method. The financial implications are:

  • The stand-alone method: Releasing equity as cash from one property, such as your home, to contribute to the purchase of another, such as a rental, and keeping both properties independent by using different lenders has the key advantage of separation.
  • The cross-collateral method: This is simpler because one lender provides 100% of the cost of buying the rental which is secured by two properties. However, this method ties the two properties together so that if you want to sell one then the lender will also review the remaining loan.

Separating your portfolio

Separating properties by using different lenders can keep you flexible as the lending market evolves, so you’re able to consistently secure the best possible lending terms and liquidate a property if needs be. It can also avoid the need to endure a portfolio review.

If your lender has a mortgage over more than one property securing its loans, and you sell one property, the lender may require a full review of your portfolio. The review will be based on the lender's prevailing criteria. If the lender’s credit criteria are more stringent than what applied when you first secured the loans, then the lender is likely to demand a greater repayment from the sale proceeds than it may have required under the original criteria. This situation can be both unexpected and cause a great deal of stress, which might have been avoided.

What next?

As an established or up-and-coming property investor, you have many thousands of dollars at stake, so what have you got to lose by checking your options with a professional?

For a free, no-obligation chat with an Authorised Financial Adviser - in this case often referred to as a mortgage broker - about your lending, call 0508 MILESTONE (0508 645 378) or leave your details below.